South Korea’s Kakaopay Corp., part of a group once feted by local investors, is poised for a bumpy month as locked shares become free for trade while MSCI Inc. may refrain from adding the stock to its indexes after the price plunged.
(Bloomberg) — South Korea’s Kakaopay Corp., part of a group once feted by local investors, is poised for a bumpy month as locked shares become free for trade while MSCI Inc. may refrain from adding the stock to its indexes after the price plunged.
The online payments firm that has Kakao Corp. as its main shareholder executed the country’s fourth-largest initial public offering in Seoul last year, after raising $1.35 billion. The stock sank on Thursday after the expiration of a lock-up period for about 65 million shares held by the company and under an employee equity options program.
Following an initial rally that was common for startup newcomers in Seoul in 2021, Kakaopay quickly slumped to now trade about 84% lower than a peak reached last year. The selloff deepened last month amid a widespread outage that snared Kakao group shares due to service disruptions and the resignation of a top executive of the parent company.
Read More: After $50 Billion Slide, More Pain Ahead for Kakao Investors
Woes regarding the stock were piling up even before that since Alipay Singapore Holding Pte, its second-largest shareholder, sold five million shares in a bunched trade at a discount of about 12% in June. A lock-up period on that block expired last month, allowing the investor to sell more shares anytime.
The recent stock-price slump makes it harder for Kakaopay to meet criteria that would allow it to be added to benchmarks compiled by MSCI in a review on Nov. 10, according to analysts. An eventual addition would trigger inflows from passive investors and lift the stock from the current price level.
“It is unlikely for Kakaopay to be included in the MSCI Korea index mainly due to its continued decline in share price,” said Douglas Kim, an analyst who publishes on the platform SmartKarma. Despite lower share prices, Kakaopay’s valuation multiples “still remain quite high,” Kim added.
There were no additional sales by Alipay since the four-month lock-up period that ended Oct. 8, Kakaopay said in a statement to Bloomberg News. “The strategic partnership between Kakaopay and Alipay for expansion in the global payment business is continuing without changes,” the statement said, adding that it is difficult to give any response regarding MSCI’s review.
Kakaopay “had one of the best listing debuts of 2021. However, the shares haven’t done much since,” said Sumeet Singh, head of equity research, IPOs and placements at Aequitas Research Pvt. “In our view, the prospects of Ant’s Alipay selling some of its stake in KakaoPay in June weren’t well flagged, which led to the tepid post-deal performance.”
–With assistance from Younlim Lee.
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